Heartland Gapes Merchant 12.4%, And Legacy Payments Have Reached Humanitarian Crisis

A lot of readers don’t believe that legacy payments processing is as bad as we make it out to be.

“Maaaaan, there’s no way that legacy processors are giant fraud-mobiles increasing the cost of living by over 3%.”

Okay, sure.

Live in your dreamworld.

Pretend that you can’t enrich yourself so much on the backs of mom-and-pop merchants that you’ll never afford rockets or flights to space.

For those of us who are willing to acknowledge that we’re not asleep, we know the reality.

Legacy payments processing is a plague on humanity.

This isn’t even a pejorative.

This is the truth.

Fiserv, Global, Worldpay, Shift4: these guys are attriting merchants at insane rates as software companies embed payments.

Today it’s estimated that ~25% of softwares embed payments, growing at mid-teens rates. By 2030, 80% of softwares will embed payments.

From our friends at Bain:

ISVs with integrated payments have been taking share in merchant acquiring, or the acceptance and settlement of credit card payments on behalf of businesses. ISVs accounted for one-sixth of 2020 US merchant acquiring payment volume, and that figure is growing at a mid-teens percentage rate. The “better together” value proposition, it seems, is delighting merchants.

How do you think this is working out for all the legacy processors who can’t spell API, let alone R&D?

Think there’s a reason Stripe and Adyen are growing organically?

Surely it’s just coincidence.

So the legacy bruisers buy smaller software companies where they can and do crank the rates.

But if they can’t?

They bleed existing merchants at such a rate that it’s a crisis.

Truly.

Yes, these people are all going to hell in the next life.

But in this life?

They’ve been immune.

Even lauded.

Elected to federal departments while ruining the lives of tens of thousands – if not literal millions – of hardworking Americans.

Why?

Well first, we believe because they can.

It’s a high: legacy payments providers relish in the fact that they screwed a customer so hard that they celebrate by buying cars, yachts, or fighter jets.

It’s the thrill of the deal, just like legacy payment bros have a penchant for high stakes activities like gambling, and then screwing over the casinos for the thrill of the adventure.

They can’t help themselves.

Secondly, it’s because SMBs are unsophisticated about payments.

It’s not their fault.

At least, not entirely.

The payments ecosystem was built to create ambiguity.

Because it’s hard to steal when things are transparent.

Payments is simple: move money from A to B.

So simple that it’s free in many countries (see UPI in India, or PIX in Brazil).

But the US is still the king of free markets.

Which is awesome.

But.

It also comes with seedy, morally-corrupt practices that, so long as they’re creatively schemed with an attorney, are totally legal.

Even if they are entirely repugnant.

Enter legacy payments

Here’s a flow chart for how absurd the merchant contracting process is.

Legacy payment bros know exactly how they’re going to make money on the merchant before they even extend the merchant the contract, meaning that the entire process is premeditated.

The contract is just the necessary formality that gives the payment bro full immunity to completely eviscerate the merchant.

Gut the business from the inside out and the merchant can’t do anything because, “they signed the contract.”

Let us give you an example to show how absurd this is.

Following the payment bro contracting process, you convince a family man to sign a contract because you’re going to provide him X.

The next day you come over and have forceable intercourse with his wife, kids, and pets.

The man screams about the illegality – not to mention the morality – and tries to litigate.

But a review of your daisy-chain contract shows that the man waived all claims and rights to everything he holds dear.

Perfectly legal.

The US legal system just says, “Proceed to the neighbor’s house at your convenience, sir.”

Now here’s the real-life proof to you daydreamers.

Carlos has been running a successful Caribbean restaurant in New York for the last ten years.

Eight years ago he had installed Heartland Restaurant POS via a Heartland sales rep.

He recently realized he had been out of contract for several years, and Heartland was significantly raising his rates.

How did he make this discovery?

Well, because even though he was still toiling 80 hours a week, and even though his top line revenue was growing, his profits had disappeared.

Carlos got help.

He reached out to a local POS supplier that walked Carlos through the math.

Carlos was near tears when he realized his predatory processor was stealing all of his profits. He felt he could not continue in business with his out of control costs.

Here are the remains of Heartland’s carnage:

But Carlos had enough blood in his body to remain upright.

Not so for the following Heartland merchant who was rescued by another ISO.

This merchant had nothing left to bleed.

Legacy payment bros are singlehandedly creating a humanitarian crisis.

When you walk down the street do you go out of your way to step on bugs?

Kick cats and dogs?

Rip flowers from their roots?

Shit on your neighbors’ yards?

Just because you can do something – either because you know you won’t get caught, or worse, because you’ve induced the victim into signing away their rights – doesn’t mean that you should.

But this precisely the type of psychopathic behavior that society has not only condoned, but celebrated from legacy payment leaders.

When the fuck will we draw the line?